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Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

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03:00:00

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San Francisco, CA, USA

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Virtual Ch. 58 (CNBC)

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mpeg2video

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ac3

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480

TOPIC FREQUENCY

Us 27, U.s. 23, Europe 22, Apple 22, Google 15, America 13, Carl 10, China 10, Samsung 8, Washington 8, Grover 6, S&p 5, Grover Norquist 5, Phil Lebeau 5, Simon 5, Emc 5, Ibm 5, Ubs 5, Detroit 5, Goldman Sachs 4,
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  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl Quintanilla,  
   David Faber. Opening bell market action. New.  

    January 14, 2013
    9:00 - 12:00pm EST  

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welcome back to squawk. let's get the last word from our guest host, henry blodgett. he's been here the last hour. henry? a thought, you have been writing a lot that corporate profits have to get reinvested here, and there's going to be a shift among shareholders how people use their money. >> there should be. if we want to fix the country. corporate profits are a pendulum. sometimes they're average -- >> you actually think this is realistic? >> you want to fix this country? stop talking about the government. get our businesses, which are still incredibly healthy and wealthy, highest profit margin ever, to start reinvesting that profit in the country. hiring more people, new plants, everything else. maximize value, not profit. that is the key. >> one day, i hope you're right. i don't know if we'll get there.
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>> you'll hire people without de mapped? >> invest in new things. create new demand. you spend -- joe kernan, you spend. >> we appreciate it. thank you. right now it's time for "squawk on the street." i'm melissa lee live from the new york stock exchange. let's see how we're setting up on this monday morning session. apple may be away, but we got a rally from china overnight. as for the picture in europe, the euro, we should note, is hitting 11-month highs against the u.s. dollar. marginal changes on a percentage basis. a road map this morning starts off with apple. even more doubts about the demand for the iphone 5 sending shares below.
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>> did you see your paycheck on friday? the payroll tax hike obviously kicking in for many americans. felt like a pay cut. will this be a temporary shock or a headwind as stocks hover at five-year highs. >> ubs achoirs tnt after a commission throws up road blocks. to the top story. in the pre-market, we've seen apple shares fall below $500 for the first time in 11 months. the tech giant has cut its orders for iphone 5 components because of weaker than expected demands. screen orders for january to march quarter have fallen about half. the company had planned to order. apple said to cut orders for components other than screens. now, jim, we've had sort of this
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concern about demand for the iphone 5. i think last week when deutsche bank came out with the note from the japanese team, specifically citing this very issue, that's when the concerns really started to mount and the stock really started feeling the impact. >> i think that there's something wrong with the iphone 5. i think that samsung has come on very strong. when you go to a resaler, the sales for samsung are much stronger than they used to be. i think this shift has got to be acknowledged. as henry blodgett said, the stock is inexpensive. when you have something that is old news, new news, it doesn't matter, there is a continuing recognition that something is just not as great at apple that it used to be. >> i think we can make the argument all day and all night, the valuation, cash on hand, dividend that apple is paying. at the same time you can make that case for a lot of other tech stocks out there. they pay a dividend and yet the stocks don't move much anymore.
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and i'm thinking of like a microsoft, for instance. >> well, i was just reiterating what henry was saying. >> right. >> i feel that, again, there's a lot of things that are subtly wrong with apple. the new itune iteration is just hated. i don't know a soul who likes it. it's very clear that there are real issues involving the ipad mini and whether it's as exciting as it used to be. there is no omg factor. it's just -- frankly, as my daughter said to me, who got me in the stock at 50, dad, apple stinks. they're just not a great company anymore. >> funny you say that, because forbes did a piece last week, talking about whether or not they have lost it. here's a quote. teens are telling us apple is done. apple's done a great job of embracing genx.
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they're all about surface tablets, laptops and galaxies. >> but i don't want to get quoted as saying apple is not a good company anymore. >> no, but younger people are saying apple is great. my daughter texted me friday night, i was at a surprise birthday party for a buddy of mine. and she said, dad, do you know anyone at apple? you've got to speak to them. i was having problems downloading my itunes, too. i think it's a good company. it's a terrific company. but i just am seeing people who liked it turn on it. i was at my verizon reseller this weekend. the guy saying, listen, i don't see the demand anymore. >> right. >> these are worrisome. it can go down, because the valuation is like other texts. i said when steve jobs died that it was just another stock. then the stock went up another 200 points. people said, you don't know what you're talking about.
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but it is a notion that it is not hot and perhaps it doesn't have great value. i think the apple maps app was not a good one. the idea that no one from apple is going to come out and say this is old news. no one. i mean, so when it's going up, apple has to say nothing. never complain, never explain. when it's going down, the never explain, never complain attitude doesn't work. >> things can move more quickly. in general in technology even five years ago. even three years ago. consumer taste, the ability to actually change quickly, would you agree? >> yes. what are they supposed to do? >> listen, apple's going to generate prodigious amounts of cash for years to come. the question is, will it come back to multiple. many will argue it is extraordinarily cheap. but things can move very fast. market share has dropped dramatically in the smartphone industry in a short amount of time. >> it's like the quote that carl
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read. look, when you have kids, saying, listen, dad, i don't want that apple product. but i can't say to my daughter, hey, what are you crazy? the stock's very cheap. what does she care about the stock? >> in all fairness, it's not a teen retailer we're talking about, right? teens are not -- they'll be grown up, buying macintoshs. >> i'm stuck in the ec ecould system. >> look, the story is that there was never any product better than apple. whatever apple put out was the best. you know, look, you're not allowed to say anything about apple. i wrote a piece saying, i should just say apple is the greatest and not say anything more. i can just say, listen, you don't know what you're talking about, except they're talking about whether to buy the product
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or not. >> analysts on the street are starting to lower their price targets, lower their estimates, et cetera. if the street is finally turning en masse, is that now the time to get in. >> the time to buy. >> right. >> except the fact that it's going to be rocky. >> we're going to sit here every day and talk about how things are not good. is that a sign that -- >> hewlett-packard has a lot of -- there's a lot of people who want to own hewlett-packard because they think it's bottomed. >> what kind of world are we living in? people want to own hewlett-packard and not apple? do you hear yourself? >> i just saw the venus demillo. >> it's in the louvre. >> it's harder. people are going to say, i'm posting cramer's address. because he has a gun license. no, i just said there's issues with apple.
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that was a good part in "the new york times" today. >> there's another debate going on there. meantime, stocks beginning to weaken a five-year high. up more than 3% in the first eight days of the trading year. the markets are facing headwinds, including the payroll tax taking a bigger bite out of americans' paychecks this year. social security taxes reverted to 6.2% of salary, up from the temporary rate of 4.2%. if you got paid on friday, guys, there's a good chance you said, what? is this my net income for the next few weeks or months? >> the charts in that group are saying -- the dollar stores, you've got to stay away. i know howard levine was on this morning in a conference call. people were so, so skeptical. if you look at every domestic retailer, say, perhaps, urban outfitters, the charts all look like they're rolling over. the retailers that are weakly related to housing, anthropology has a housing fund in urban
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outfitters, they're holding in. but i think people are worried that retailers -- there was a big theme that you've got to stay home to invest. all of a sudden people want anything that is emerging markets and nothing related to retailers. it's stark. >> do you think the old barbell where you buy the high end and very low end -- if consumers across the board are feeling it? i would imagine the low-end consumers are feeling it, and the high-end consumers might not feel it, except in later tax increases. >> i think deutsche is holding in. i'm just -- the pressure in dollar general, the pressure -- those conference calls were hideous, by the way. their stories were so bad, you could see people fleeing from the stocks. it's very difficult to defend them. the analysts have turned on them so aggressively, that no one -- the skepticism of what
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management says is just so thick. it's difficult to own them. and people feel that's where people come back. do they not shop at all? that's hard to believe. i mean, do you go buy mccormack, because they are stay at home? you cook? >> spices. >> you buy mccormack because you're cooking at home. >> more broadly, though, between the tax debate and whether that stops, slows consumption, politico has a poll that half of the republicans want to see a default as we get closer to the debt ceiling deadline. will this put a limit on what stocks do over the next few weeks? >> i read this weekend another piece that says the social security checks aren't going to come out. they're going to come out, okay? we can go down this path and scare people. but i'm not going there. i remember when i was going to the balk last year and we had the debt ceiling. a woman said, i'm not going to get my social security check. and i said you will. she said, no, i'm not. i feel like, it's incumbent on
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people to say, look, maybe there's a week -- but when you say social security's not going to come out, we are not a third world -- an emerging third world nation, whatever is political to say. we can really scare people here. our job should not be to scare people. but you can scare people very easily. >> right. on the other side people are citing mutual funds, we talked about this on friday, and thursday of last week as a positive. perhaps you shouldn't, given there were so many inflows to bond funds. the s&p was up nicely last year and the year prior, so -- who knows if it's not indicative of the opposite, that the retail gets the memo last. >> what you're saying is that washington may have -- we may talk about washington a lot, but the individual investor is not hearing. >> no. but they're looking at -- something we've talked about at the beginning of the year, extraordinarily low bond yields, and the risk to the extent people understand that risk, if you see interest rates rise and what seems to be an appetite for
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equities early in the year in terms of inflows. we'll see if it continues. >> limited partnerships, a bunch coming public this week. those are good bond equivalent, get some yield. let's watch how those deals do. i agree, that the individual just saying, listen, i can't make ends meet, take that vacation on bonds, and did they get the memo on the social security checks not coming? well, they just heard us with the fiscal cliff, they've heard us with the election and the last debt ceiling. and they heard us with the italian bonds. they're saying, maybe the media is too negative. >> speaking of deals, let's talk about one deal that does not look like it's going to happen. u.p.s. is abandoning the takeover of dutch delivery firm citing resistance from european regulators. u.p.s. had sought to buy them for the european network in business in asia and latin america. not entirely a surprise, i would imagine, since the ecb had sent a number of requirements out. >> but melissa, i think there
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was a generally held belief this was making good progress. i think the reason you're seeing tnt shares down so sharply because it was something of a surprise. you know, it may trade over there, but the fact ,t is owned largely to -- well, over here, and as you might expect hedge funds have been big players in this. they are getting -- well, they're just getting crushed today, as you see that stock down. it was a debate about creating competition there. there appeared to be the dpd division of lepost, the french post office essentially. they seem to be making a lot of progress in terms of access for air routes, and, you know, they had already gone through 17 countries where they had remedies, that is u.p.s. and yet they were unable to get there to the finish line. so a surprise to a certain extent that u.p.s. decided to throw its hands up and say enough, we're not going to be there. this idea that fedex doomed the deal because it wouldn't buy
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divested assets, i'm hearing that's not necessarily the case. also not expected really that fedex will come back and play in a meaningful way. some may hold out the hope that they may come back. >> did u.p.s. -- did u.p.s. get lucky? they paid too much for this. >> a big number when they put it out there. but there were some very meaningful synergies. of course, you start to eat away at them when you say we need this, this, this, and this. not the first company to watch its deal go down given european regulators. we'll watch that stock today. >> the facebook rally, meantime, rolls on as the company gets ready to hold a big event tomorrow that is full of mystery. we'll tell you about the latest upgrade this morning of the social network. also ahead, one of the street's best-known analysts. take one more look at futures as we kick off a week of full of
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earnings, full of data. and a lot going on today. ♪ ♪ ♪ [ male announcer ] don't just reject convention. drown it out. introducing the all-new 2013 lexus ls f sport. an entirely new pursuit.
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getting word that the president is going to have a press conference at 11:15 a.m. eastern time in the east room of the white house. this will be the last press conference of his first term. comes as a bit of a surprise to the press corps this morning.
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it could cover anything from immigration to guns to his cabinet selections. so we bring that to you live at 11:15 a.m. this morning. >> we're watching shares of facebook, because they are rising pre-market. deutsche upgrading from a buy to a hold. th the call comes ahead of an event facebook is holding tomorrow in which the company is inviting people to come and see what we are building. facebook shares up 65% in the past three months. 65%. that's a tremendous run over the past three months. >> a lot of momentum here. what i'm hearing from advertisers, they offer the option that no one else has. that the mobile plans that zuckerberg announced have really come on strong. again, this is something that will reference what henry blodgett said this morning, comparing apple. facebook has tremendous momentum. you can argue it is overvalued.
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but i can tell you the advertisers do love these new different -- you know, let's just say different methods of communicating advertising. a lot of other companies not been able to reach those advertisers. facebook has. and it's working. it's working. >> yeah. >> price target for deutsche bank went to 40. above the ipo price seen as sort of a high water mark for a lot of investors who got stuck with the shares on the fateful day in may. >> raising numbers facebook, because the big advertisers are saying, i can get broader reach, younger people. they want that group. it's working for them. and again, when i say it's working, i'm not saying the momentum is working for the stock. there are actual advertisers who say, listen, i want to do a plan on facebook. because when facebook sees you as an advertiser, they have empirical data showing it's really working. and the return on investment is much better than anybody else. >> for a company who says we
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deliver the super bowl every day, we're going to get an actual super bowl in a few weeks, after an amazing weekend of football, jim. whether your teams won or lost. >> i love that color. >> incredible. cramer is ready to help you get off to a fast start in a new trading week. he'll bring you the "mad dash" next. rick santelli will talk with americans for tax reform. grover norquist, what is the father of the anti-tax increase saying about the debt ceiling standoff? one more look at futures as we kick off monday morning. don't go away.
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about seven minutes before the bell. let's get jim's "mad dash" this morning. >> there's the investing carl icon. always a good investor. and then the put into play carl icon. i think transocean, this is more of a rock bottom valuation. it had been hurt very much about an investigation, obviously what was the role in the condo. that is now behind them. the stock spiked a little bit after that cloud was removed. i don't think anybody can buy them. there's no one big enough to buy them in the sector of the driller. they break the momentum because of international drilling. it's a deep water driller, chiefly. not domestic land drilling. >> big calls on hp and emc.
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>> look, this is the kind of thing we're seeing. what's cheap, okay? hewlett-packard, jpmorgan said they're cheap. it could divest some assets. sanford bernstein said the break-up value is very good. they do have a consulting business, a printing business. ibm at one time split up, downgraded by the way. the emc is really complicated, because they're saying that they're slowing storage. this is the third downgrade emc. my travel trust sold emc, because i fear pre-announcement. i fear there could be something that comes out and says, look, we're not going to make the quarter. >> even jpmorgan cut of ibm mentions if some of these safe havens could lose some luster, if smaller tech firms grow faster. >> i think that one of the themes of research and whether you want to take research at its value or not, is that, listen, we should buy more emerging
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market names, look at companies we regarded as being risky. i've got to tell you, the safe havens, whether they be general mills, okay, or whether they be ibm, ibm inexpensive stock, but as melissa mentioned, a lot of these stocks have been inexpensive for a long time and it doesn't matter. >> facebook jumping ahead of a big announcement tomorrow. there are those who say it is time to sell the stock. meantime, gm experiencing a resurgence of its own. the stock up sharply in the last month. phil lebeau with the gm president from the auto show. let's get the opening bell in just a minute. what are you doing?
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[ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ a minute and a half until the opening bell rings here on wall street. watching a lot of things. we're watching big moves in the currency markets that we've seen overnight. euro hitting an 11-month high. the yen hitting a 2 1/2-month low. these are things we continue to watch, in addition to the equity markets. >> talking to our partner simon
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this morning, how maybe spain doesn't need a bailout. the banks are suddenly talking about a return on equity that is higher than american banks. the big issue has been will they get complacent over there, because there is so much good news in europe. it's not backed up by growth. it just seems to be backed up by solvency. >> we had a lot of european officials coming out of late saying things are improving, that the worst is over, the crisis for the euro. we had them saying last week they were better than a year ago. >> i would like to see their change on the debt. >> more spending cuts. >> is there a large american bank that is not reporting this week? i mean, the number of banks coming out over the next two days --
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[ bell ringing ] >> harry winston, this is a swiss company buying an american company. these are the things that we maybe give you perspective. i know that may be too small to hit your radar screen, david, but the fact is -- >> opening bell here. back to harry winston. the by standards, small deal. >> it's still not insignificant. i would say switzerland, given its currency, is different from the rest of europe. >> yes, it is. but this is a dimon play -- >> all cap. >> these are $40,000, $50,000 watches. this is not -- you know, swatch.
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my first watch was a swatch. i went to century 21. another place you and i have got to get to. they had a swatch, and i said, i can afford that. >> and you traded up to a bregay? >> i bought it on canal street. >> so anyway, this deal, it gets into the sort of high-end watch business. but the diamond business will break off. hwd, that will change the dominion diamonds. they're not buying the diamond mining operation. they're buying the workers, 500-plus worldwide. so those are the assets that they are getting. >> look, i think it's important that if europe has a pulse, there will be european companies that start doing better. there's a lot of stocks that are flying, american stocks. they have exposure to europe. you start thinking, you know what, people may not cut numbers because of europe coming into this quarter. and that's a reassuring thing.
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i'm so used to numbers cut europe. look, ford remains a hot stock. the european auto parts, the american companies that are european auto parts have been hitting highs. the european story just seems to be no longer a headwind. not going to call it a tailwind, but not going to call it a headwind. >> we continue to keep a close eye on what's going to happen to that name, reports out of the journal today they cut the orders for the lcd screens on the iphone 5 by 50%, or close to it. although ubs is out this morning saying it's old news. jim, you were saying, it's hard to tell what is true from fiction. >> this is what happens when a stock's got kind of a questionable base, and the analysts are trying to figure out how to put a distance between themselves, and the news reports are very disjointed. and the company, of course, is closed now. we'll have a quarter coming up. we'll talk a little more.
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but i keep waiting for the big product. i keep waiting for the product that just says, wow, are they back. as david said, that product comes out, then they'll be back. >> by the way, that is the first time below 500 since february. i believe 16th. that's a long time. and since the iphone 5 came out in september, it's down 29%. >> yeah. we should note, too, take a look at some of the chip suppliers. the apple supply chain is feeling the impact as well. take a look at broad com or qualcomm, each trading down by more than 1%. the ripple effects are far and wide when it comes to the tech space. >> obviously samsung has just gotten so much momentum. it is amazing. samsung is a global reach company that doesn't get enough -- >> it's not an american company, but the numbers are going to be quite something to look at what they're going to be able to do for the quarter they're
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currently in. very interesting. we should point out that the long hewlett-packard short apple trade is working out quite well today. i don't know if anybody actually put that on. but the backwards world, hewlett-packard up almost 2%, after a very strong week last week. sorry, it's about 1.5% right now. >> the so-called disappointing guidance, obviously people are willing to speculate on stocks that are down and out. interestingly enough, sprint catches a couple of downgrades. why? because of clearwire. maybe they have to overpay for clearwire. verizon gets a downgrade. subsidies, are they going to get hurt in subsidies. again, i like to go to different retailers. i like to go to the verizon stores and trying to cut my bill to verizon. and they want you to buy a samsung. they want you to buy an android. they talk about google as if one's got momentum, one doesn't. it's almost as if they're selling stocks at these verizon stores. >> verizon downgrade from ubs,
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one of the more seasoned analysts talking about margin pressure, lowers his numbers. >> do you trust his work? >> i think he does very good work. he's at least paying attention. >> some guys know more than others. >> does not believe the -- i mean, cites competition at the end of the day. potentially pressuring margins, even with the benefit of the union deal they will get, which will help. so that put into play, very high multiple. we talked about that any number of times at verizon. i think this is a valuation call on his part. >> moved up a lot. >> interesting five big dow stocks with big calls. ibm, verizon, xp down. >> it was a broader call on this space. goldman sachs liking as their top pick. they like capital one financials, saying they're best
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positioned to outperform. dfs and cof they say that normal credit losses and higher capital returns are seen there. one reason why -- a couple reasons why they like these two stocks. >> i think that capital one has a lot of momentum. they've made an acquisition. by the way, you know what, you want to turn around apple? make an acquisition. >> itwitter. >> the cash for a rainy day, the rainy day is upon us. i find twitter to still be a -- when you're with younger people, they're like, twitter's hot. i think that there's a perception that twitter's got the same momentum that facebook has. if apple wanted to do something to change the momentum, but you know what, this apple doesn't seem to care at all about momentum. what are you talki about momentum? we make phones, ipads. >> a big acquisition like let's say they buy twitter. people will say are they buying out of desperation, because they see there's an organic growth within their own company, and that's another nail in the
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coffin to apple's downward spiral. i don't know. >> you're right. >> we have to say that. >> that would be one of the concerns. twitter, i mean, apple is so enormous. at the end of the day, the law of large numbers seems to be the most applicable lesson here. >> remember jim stewart? he was the first one who put it out in "the new york times" column, they have to receive the gdp, a couple of countries had to exceed -- look -- >> you're talking about a trillion-dollar market. >> it is the "sports illustrated" cover of -- >> you have to back away. >> exactly. >> you know, start to see price targets to indicate trillion dollars. remember that for history if we ever see it again. >> although, those companies -- take a breather. i think take a breather. >> let's get over to bob pisani watching what's happening on the floor. >> good monday morning, everybody. my favorite story over the
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weekend, worries about the debt ceiling, of course. but my favorite story over the weekend was an article in politico that basically said, is wall street over washington? are we over the his trionics? that basically wall street got used to the idea that washington takes everything to the brink and eventually they end up making a deal. it's the idea of crisis as the new normal. i happen to agree with this theory. the problem is if something actually happens and they let it go over as house gop people are starting to talk about, the market is going to be taken by surprise and that's going to be a big problem. meantime, i kept waiting for the great deals to happen over the weekend. on friday when we got the news out, that inflows into stock, mutual funds, were the highest they had in a single week in many years, on top of new highs in stocks, i figured this would create a tidal wave of new stories in the press. yet it was subdued. most of these stories were very
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subdued. i saw stories that said, inflows from retailer investors might be sign of a market top. that's an old theory, of course. but still, the idea that stock market is back, everybody's still stamping down on the story. but one sector that's not is the so-called smart money. we like to make fun of them, but did you see some of the data on hedge funds, what was going on here? four-year highs in terms of their leverage in bonds. they see what i've been seeing for a long time, the bond rally very long in the tooth. they see europe stabilizing. they see japan in hyper stimulus mode. china signs of bottoming. europe muddling through. there, leveraging up, not only going long, they're leveraging up. obviously they underperformed last year. they're trying to get a leap on what's going on this year. that may be the right way to play it. new highs, india, portugal, greece, italy and the uk today. one that's not, china. but did you see chinese stocks? shanghai markets up 3% today,
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because the head regulator, the head stocks regulator in china gave a speech saying that foreigners should be allowed to own ten times the level of stocks they're allowed to right now. you all know, you can't invest in mainland chinese stocks. there's a limited program to do that. but there's only about 1.6% of mainland chinese stocks owned by foreigners right now. the chief regulator, the head of the s.e.c. there, as it were, said it should be ten times higher. that's getting a lot of people's interest right now. if that happened, that could be a major factor in moving into chinese stocks. chinese mainland stocks notably underperformed because of the lack of participation from foreign investors. finally i want to note, ppg, which is very big in the chemicals, paint, coating business, all around the world, aerospace and automotive, had a good earnings report and specifically said they're seeing a solid growth rise in north america for 2013. and proving growth prospects in asia, and subdued levels of
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activity in europe. i would say that's fairly positive. the stocks had a historic high. they'll spin off the chemicals business shortly. historic high for that stock. not bad. guys, back to you. >> perfect rundown. i mentioned portugal, constantly takes my breath away, the countries doing well now. the stock markets that are doing well. let's shift to bonds and dollars. rick santelli in chicago. >> good morning, jim. i heard about bob talking about long in the tooth rally, bull market and fixed income. long in the tooth isn't a technical formation that will give you a great signal. we continue to only operate a ten-year, about eight basis points into the sell-off so far for 2013. closed last year at 176, hovering at 184. two-day chart of tens, look at a two-day chart of 30s. they're slipping a bit in yields, boosted by price. opening up to one-year chart on
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30s, it really looks like a market that's rolling over. we're about a 1 1/2-week low yield on 10s, 30s, a little bit more formative on the comps, a little less than a week. but the same formation. now, let's look at the fx, where things are go, go, go. if you look at the euro/yen, you have to take the chart back to may of 2011 to see the last time at these levels. you double that when you're looking at the dollar/yen. you would have to go back to june, actually may of the previous year. so add an extra year. and if you just look at the euro against the dollar, these are the best levels on the greenback side since february of last year. so closing in very close to one year. the common denominator continues to be yen weakness. there was a variety of stories talking about how this changing dynamic of abe is going to affect some of the bigger countries, like germany and their export market. we'll just have to wait and see
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because it certainly doesn't look like abe's going to be putting it in neutral anytime soon. back to you. >> thank you, rick. coming up next, we'll take you to the detroit auto show, that is where phil lebeau talks to mark royce. which ones are poised to win the market share this year? a live interview with rory mcilroy, along with nike golf president, nike's quarter-billion-dollar man. wow. look at the early movers here on wall street. ♪
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ally bank. your money needs an ally. take a look at shares of apple, holding above at this moment in time, above $500. $504.04, the last trade there. a couple of reports indicating that a screen order for the iphone 5 for the january-to-march quarter have
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fallen. coming out over the weekend saying the top of the bottom line stilts should fall 10%. >> general motors making its presence felt at the big auto show in detroit. our phil lebeau is there with the president. >> good morning, carl. i'm joined by mark reuss, first on cnbc. this is a big deal. we're standing in front of the car of the year. >> we're very proud. >> which is hard to believe. >> it is. we make some great cars. but this is the first time we set the mark with car of the year. we're very excited. >> this is aimed at making more of inroads with the luxury markets. you felt like in the past you really were not quite a competitor with the cts, right? >> we had the approach in the past that was cars were sort of in between what has already been set as the class in the luxury space. this is aimed directly at the lower class, sohathe entry class of it, we're going to take the cts next year and aim it right at the middle of the pack,
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and then we'll have entries that will fill out the portfolio in cadillac. this is a first great step for us. >> last night you wowed the crowd when you unveiled the new chevy corvette, the stingray. you brought back the stingray. styling cues from the '63 stingray. tell me a little bit about this. people look at this and say it's a niche vehicle, but it's an important vehicle. >> it is. you look at niche vehicles that are much more expensive, at the heart of corvette, and what the heart of this corvette, and the reason why we brought back the stingray name is the futuristic styling, but it's not just an evolution of the car. both technically and designwise. we felt like because of the large step technically, 450 horsepower, 450 pounds of pork, torque, and it will be obtainable. >> given how many products you are rolling out, 75% of your portfolio revamped by next year, we've never seen this much of
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influx of new product in the u.s. can we keep margins in this industry the way they are? >> it will be a challenge for us. as we have a mature market, and the hyper seg mentation, this is going to be very competitive. great for the customer. >> tough to keep the margins. you've got the car of the year. mark reuss head of gm car of the america. car of the year, big awards here at the detroit auto show. back to you. >> you got that right, phil. talk to you later on this morning. phil lebeau in new york. coming up, meet the ceo dubbed fashion's fairy godmother. but first -- coming up, it doesn't matter how big or small you are, everyone has a hobby. whether it be water skiing, or six stocks in 60 seconds. just don't jump off halfway through. "squawk on the street" will be
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let's see what's coming up at 10:00 on a monday morning. simon hobbs is here. >> we'll talk more about apple. time to double down on apple with the weakness we have for the expectations they cut demand. and first interview with mark mahaney. jcpenney, who else to worry about, and how do you play it. next hour on "squawk on the street." six stocks in 60 seconds. >> new management. still natural gas, be careful. >> vera bradley. >> when you have a cfo who leaves then everyone does freak out. wait for the next quarter to see if there's any turning. >> goldman likes starbucks. >> the bright spot they're calling it. remarkable job. >> hess sell to neutral. >> people keep talking about hess breaking up the way marathon broke up. china coming back, the worst it
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over. people will confer transport. >> wells cutting georgia gulf. >> frank mitch said the run is over. frank nailed the whole run. i don't want to leave it, because it's a big housing play. they make pvc. >> after killing it on pharma last week -- >> thank you. thank you. you know what, no particular guests tonight. but we're laying out another suggestion about who can merge. we see mergers happening, and what is the investment bank theme. we're right about some of these deals. thank you, about the pharma. cengene, a ripple. look at those charts. they are parabolic moves. >> speaking of which, you mentioned some of the losers doing well this year. r.i.m. up 10%. >> oh, my. >> since december 24th. 40%. can this go on? >> look, they guided lower, and maybe this iteration of the 10
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is good. look, these stocks, they got hit so bad. that it's almost as if -- i wouldn't get in front of these juggernauts. i have no fundamental reason other than the new blackberry is doing well. i have no fundamental reason. >> we know how momentum plays off the end. lack of clarity means we don't know how long it can go. >> exactly. research in motion, people just immediately hit it down to 11. and it's back. facebook is on the momentum. i always like to have a thesis why something is going up. hewlett-packard, maybe they break up. research in motion, maybe sales are better. >> you always say, you've got to have your edge. see you tonight. >> thank you. >> 6:00 and 11:00 eastern time. more on the apple supplied. the stock falling below 500. should you shrug off the iphone
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demand worries and get in? and live from the detroit auto show. can mercedes win the luxury car wars when "squawk on the street" comes back. what are you doing?
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let's get to the road map for the next hour. ap pp shares continuing to hover near 500 after falling earlier on in trading. what it means longer term for the stock. >> deutsche bank upgrading facebook to a buy. the rest of the street awaits tomorrow's mysterious event. we've got a technical analyst who said it is time to sell. >> keeping with the big tech theme of the day, mark mahaney is here for his first interview since he left citi. let's get back to the big story of the morning here. apple shares down following reports it is cutting orders on iphone components due to weaker than expected demands. shares in pre-market trade and in regular trade falls below
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$500 for the first time since february. so we ask the question, how far could the stock fall at this point. senior tech analyst at jeffries. peter, great to have you with us. >> thanks for having me. >> i feel like we've had a drum beat of questions when it comes to demand for the iphone 5. a number of analysts saying component orders are going to be down, and now we have the reports from the "wall street journal," also the nikkei stating the same thing. >> we think this is old news. we think all of these cuts happen around mid-december. we were in asia, in fact, we were in tokyo, where a lot of these display companies are based, and these cuts are talked about. we talked about the fact that they were hoping that iphone demand would be a lot stronger through q4, and those optimistic projections didn't show up. so they've been curtailing production of components as inventory levels sort of stabilized with demand.
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what it means is, it's selling well. but not as well as they'd hoped. >> is it concerning that it's not selling as well as it hoped for this quarter, and then we're entering another seasonally weak quarter? >> we look at it as a bit of a letdown obviously. it's not great this has happened. we thought this device would be the biggest seller of all-time. and in fact, we think around 50 million units sold in q4 which would make it the biggest selling electronics product of all-time in a quarter. there were hopes it would be better than that. there were hopes in q1 demand would be a bit flat. instead what we're getting is a seasonally-ish type decline in q1. >> given that you believe this is somewhat of a disappointment of what you anticipated prior to the launch of the iphone 5, at what point do you reconsider your price target which is at $800 a share right now? >> we just cut our price target in december. we were anticipating these cuts. we talked about it. we've adjusted for that. if we received another round of cuts, or some new information
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beyond what we'd already uncovered in december, we obviously would have to evaluate that. right now, none of this stuff is new. we expect builds of iphone 5s to be around 40 million units. >> what you're describing here for people watching is an extraordinary opportunity, if you're right, and the stock could rise by $300 from here. assuming everything that we know now, peter, just talk us through how you justify that. >> yeah, if we look at the full year out, we think that the company can do somewhere around $50 of earnings. remember, they have around $100 per share of cash. by the end of next year, they'll have somewhere around $150 share of cash. you're actually buying a stock that is effectively $400. we think that at a $50 earnings number for the year, that that's a cheap valuation. we also think that you're going to have product launches this year. >> i'm assuming tv is what you were going to focus on that. before you go on to that, let me
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ask you what the announcement from china mobile could mean for the stock, if they do do deal, take the iphone 5 with 700 million subscribers, what would happen to the stock then? or is that in the estimate that you have? >> it's not in the estimates we have. we don't think it's in anyone's estimates. we think demand could then be obviously a lot stronger. china mobile's big advantage is it serves the tier tier 2 to tier tier 5 cities better than unicom and telecom. so china could become the largest market for apple within 24 months, if that were to happen. >> peter, we get the gain in shares that's being made by samsung. at the same time, when apple is selling fewer iphones potentially because of weak demand, are we seeing at the margins any of that going to nokia or r.i.m.? research in motion up 10% in today's session. >> no. nokia sold 4.4.
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we don't think that's a good number. r.i.m. sold somewhere around of 6 to 7 million. we don't think those are big enough to account for the share loss. at the lower end phones is where the real growth is. and chinese white label makers are the ones stealing the growth from everyone else. the challenge is the market is bifurcating, and the high end is slower growth than the low end. >> peter, great to have you. >> thanks for having me. >> let's move from technology to the big banks. jpmorgan getting set to report its fourth quarter earnings on wednesday before the bell. kayla tausche has more on that. this is as much about the report to the board on the london wales, tomorrow ultimately what that means for jamie dimon's bonus. >> it's going to end up being an extremely busy week for the bank. we have the fourth quarter earnings released on wednesday.
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we could also get the report on the london whale report. the panel is led by former exxon mobil chairman and chief executive lee raymond. he and his three-member panel were given wide-ranging authority over nearly nine months of investigations to cross check findings of management and regulators. remember that trade cost jpmorgan more than $7 billion. it also cost the jobs of several key executives. last june, cnbc's mary thompson asked ceo jamie dimon how his complacency as ceo should be penalized and here's what he said. >> my comp is completely set by the board of directors. 100% set. i assume they'll incorporate this in how they evaluate me. but i'm going to leave that to them. i think it would be inappropriate for me to tell you what the board will do. >> looking squarely at dimon's pay. it's fallen over the past five years. but he still remains the highest paid wall street executive, earning $23 million in 2011,
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with $1.5 million base salary, $4.5 million cash bonus and the rest in jpmorgan stock. at this time, guys, it's unclear how much the board, which meets today, will dock from his pay. even in the face of the loss -- the bank has managed to post record profits. this quarter should be no different. the stock up 12% since it first disclosed that blunder in early may 2012. guys, back to you. >> kayla, thank you very much for that. this weekend, many americans had the opportunity to absorb the fact that they are getting let in their paycheck, and it's going to social security. eamon, good morning to you. >> this is the tax hike that nobody in washington wanted to see necessarily, but all parties ended up agreeing we're going to see it in the end. you remember that fiscal cliff debate, so focused was the media and all of the folks in congress on tax hikes for the rich. a lot of people missed the fact that the payroll tax holiday was going to be allowed to expire, both republicans and democrats
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agreed to allow that to expire, which means that the fica tax line on your paycheck has taken a bigger bite than it used to. why did they let it expire and why did they let taxes go up for average americans as well as for the rich? well, because that money goes to the social security trust fund. take a look at some of these numbers. you can get a sense of just how damaging it was to social security trust fund, saying that the temporary reduction in the social security payroll tax rate reduced the payroll tax revenues by $103 billion in 2011, and by a projected $112 billion in 2012. and that means that the social security administration says it will exhaust its trust fund reserves by 2033. three years earlier than they previously had predicted. now, republicans criticized this as sugar high knicks, bad stimulus style politics. democrats said it threatened social security. so together they agreed to let that thing expire. but now that a lot of folks are getting their first paycheck of the new year, they're realizing
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what a bite it will take. and we're expecting to hear a little bit about this in taxes, and the rest from the president in just about two hours -- our 1 hour and 15 minutes. the president will hold a news conference at the white house. we expect a lot of questions about the debt ceiling, and where the nation goes from here. carl? >> we'll take that live obviously, eamon. talk to you then. we're one day away from facebook's big event, whatever that is, tomorrow. as the stock has surged from the november lows. could the social network soon return to that magic ipo price of 38. technical look at facebook when we come right back. [ male announcer ] staples is the number-one office superstore ink retailer in america. now get $6 back in staples rewards for every ink cartridge you recycle when you spend $50 on hp ink. staples. that was easy. [ male announcer ] how do you turn an entrepreneur's dream... ♪
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take a look at facebook shares this morning, off just a touch. you know what it's done over the past seven or eight weeks, recently passing the $30 mark, that hasn't happened since july. why is the next analyst saying it could be the best time to sell? mark, welcome back. >> thank you. >> this kind of momentum looks pretty enticing. >> right. >> why do you think it shows signs of consolidating here? j facebook, along with pandora, have reached levels where they look like poor risk for rewards to go long. they've come a long way very quickly. it looks like they need to consolidate recent gains before
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they can move higher. >> talking about the signs of exhaustion, what are you seeing? >> there are three things i would point to that look important. one is that a lot of these stocks have gotten very, very overbought. if you look at rsi and other gauges of momentum. facebook in particular has moved over 80% since the lows last september. really 22% the first nine trading days of this year. i think the levels are unsustainable. if you look at a stock reaching former highs, they made a high back in june, 33 1/2. technically a lot of times when you see a rally up to a former high, oftentimes you see a little bit of resistance. third, indications of upside exhaustion by the market indicators is something i use quite frequently, also showing signs of td essential and td combo countdown. and if you look at the broader gauge of social media, be it the global etf that tracks these, it's reaching levels that were
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last september and last june. the bottom line is, these companies have come a long way. i still like facebook better than stocks like pandora. but they've come a long way very quickly and i think they need to consolidate. >> in terms of the etf, though, that doesn't seem like a very robust indicator, because facebook, i would imagine, is one of the biggest components, in the facebook related shares like zinga which is also part of that etf. >> the fact is, that it looked almost identical reaching these former levels, as does facebook. and so at least for my purposes, it looks like a good gauge. i'm not basing everything purely on this etf. but facebook, it's gotten a little stretched. i like the stock personally over the next three to four months. i think it needs to backfill a little bit. 28 1/2 to 29. if the stock were to get back -- which is not insignificant. it's more than a 10% move.
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the market overall has gotten stretched. i think facebook needs to pull back. >> what would you say to people who might listen to what you're saying, but perhaps read deutsche bank's notes that we have out today? they've upgraded the stock to $40, that's their target. they said it's got more revenue momentum than any company they're covering into 2013, growing more than 40% this year. well above consensus. tomorrow we have this announcement, which is a shock to the system in terms of technical analysis. they could say, we're going to have social search, maybe challenge google. how should people rank what you're saying against what deutsche bank is saying? >> a lot of it is due to time frames. deutsche bank is looking over the next 9 to 12 months in terms of where they think the stock's going. from a trading perspective, oftentimes it pays, if a stock has had a big run near the high, to take some profits and take things off the table ahead of that. i have no doubt what they're saying is absolutely correct.
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i think the near term has run too far, too fast. they might need to pull back. >> is there any risk because it's only been public for a limited time, that what you have imperricly is less certain? >> if you look at different charts at different time frames, technicals all seem to work. it doesn't necessarily matter it has limited price history in this regard. it has been out since last may. you have been able to use technicals profitably to make buy decisions in this stock since it became public. the fact that it's run up 22% in nine days, now we're nearing former highs, it's not the ideal area to speculate ahead of a big announcement in my view. >> the previous june highs of 33. i presume that's where you could see resistance. when people get hold of the stock at 33, they tend to go. and so -- >> that's right. >> it stalls a little bit. at the same time, at what point do you start getting bullish if it does decisively cross 33. does it create a new leg higher? >> i think even in the short
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term, i wouldn't be, you know, i wouldn't chase it. obviously if it gets over 33 1/2, which is those levels on an interim basis, that probably means the stock gets up to 38 to 40 by march. it's just short term. it doesn't look attractive based on, you know, based on where it's gone. >> good stuff, mark. >> thank you. >> hard to argue with that. you do have some interesting models. we'll see you next time. >> thanks. >> retail space, let's check in with kayla back at headquarters. >> well, melissa, shares of jcpenney, worst performer on the s&p 500 today. look at it down better than 4% in just the first half hour of trading here. we have two reports out. one saying that jcpenney had a terrible holiday sales season. we have yet to confirm that. of course, we're watching it. another is talking about the effects of these higher taxes on retailers. some saying it could hurt the less affluent, and of course, we know jcpenney is trying to pander to the more upscale shoppers. will it work? the market doesn't think so.
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>> thank you very much, kayla. we'll stick with best buy, in addition to jcpenney, both thrust into the spotlight for cash flow concerns. which of the retailers might be in the same boat, and we'll explore how you make money from those difficulties. she knows you like no one else.
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u.s. hitting a debt ceiling by february 15th, steve liesman joining us now. steve? >> melissa, thanks. most of them are off the table, a weekend of debt ceiling trash talking between republicans and the white house over the coming brawl over the debt ceiling. administration officials in a series of statements and discussions saying that all the cool, clever and quirky ideas that people have been talking about to avoid the debt ceiling are off the table. the administration in one form or another over the past several weeks has rejected the platinum coin idea. that was on saturday.
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scrips or ious issued by the government. and asset sales, which is another thing that's been making the rounds. jay carney on saturday saying there are only two options for putting the nation into default. others say the ideas put off the debt ceiling problem, or make the country look like a banana republic. some house republicans are seriously considering putting the nation into default. po lit ohco in a story this morning said default is becoming more widespread and getting more serious traction than people realize. kathy mcmorris rogers telling politico i think it's possible we would should down the government to make president obama understands that we are serious. she said there is no more road to kick the can down when it comes to spending cuts. meanwhile, the federal reserve would not comment on what they would do if there's an order from the treasury to make a payment, but there is no money in the treasury's bank account.
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previous debt ceiling debates, treasury and the fed work together to come up with a payment plan to prioritize how to use what money the government has on hand. but i talked to several fed officials about prior debt ceiling showdowns, and they said the fed said there would be no way to proceed without money in the treasury. we'll see what president obama says in his press conference, if he ratchets up the rhetoric this morning. he's been clear he would negotiate only spending cuts, but not in context of the debt ceiling debate. simon? >> okay. >> steve, are we all agreed on what the word default means in this case? we're going to be talking about it an awful lot. >> great question, carl. it's a political question. you can default on the interest payments, and that's a sort of, i guess the technical or legal version of default. or you can default on obligations. in other words, the government
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incurs a debt, but doesn't pay it. that's of a different order of magnitude from defaulting on the interest payments on the debt. in general, the white house wants you to believe that default is everything. and it's a terrible, terrible thing to happen. where as i think the republican point of view is more narrow, that you can default on other payments and still use the incoming cash flow from the treasury to make those interest payments. certainly we will have that cash flow to make those interest payments. the question becomes, remember what the meaning of the word is, we're now in a world of, carl, we're going to debate the meaning of the word default. >> steve, is there any indication as to what the priority would be if we came to the situation where we had to decide what to use money for, whether it be interest payments come first, pay the chinese for the interest on the treasury holdings, or do you want to pay social security to u.s. citizens? >> well, i think it was, melissa, until you just made that statement. if you're going to put it in context, we'll pay the chinese,
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i think for sure what would happen is we would pay the interest on the debt, that would be in the first order, and then a chinese menu, for lack of a better word, department of education, not the pentagon, veterans and maybe not medicare recipients. that's really one of the things you could put off payments, you can also, you know, all kinds of things. a grab bag. there's certainly not enough money coming into the treasury to fund the appropriations from congress if we don't have the debt ceiling. >> let's see what the president has to say in 50 minutes. steve, thank you for that. >> thank you. >> cash flow concerns clearly hitting well-known retailers, including best buy and jcpenney. on friday, jcpenney was downgraded to sell by usb, the firm cited cash flow problems. are there other retailers facing similar issues and what does it mean for you as an investor. joe feldman is managing director and senior research analyst. good morning. >> good morning. how are you? >> i'm good.
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before we dive into the individual issues here, is it fair to say that across the retail sector, we've got mounting evidence that it was a rougher holiday period than we thought, and the discounting was greater than we might have expected? >> i think it's a fair statement to say that sales did come in a little bit below some expectations. they were towards the lower end of the expectations. it wasn't awful as some initial reports had. but it wasn't a great holiday season overall. >> okay. so the lack of cash flow obviously means different things to different retailers, depending on the situation in which they find themselves. jcpenney may not be able to roll out as many stores as quickly as we thought. best buy may not get a leverage buyout because it doesn't have the cash flow to fund the debt that would involve. where would you lead us within your sector and what advice would you give investors? >> well, you do want to clearly watch that cash flow. there's different reasons for some of it. best buy, for example, their accounts payable was under pressure, because of the fact
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that they received goods a little earlier than they had a year ago. in order to have proper inventory for the holiday season. so that meant that they had to pay off those gooding a little faster. so for best buy, it's a bit more of a timing issue. we still have them generating almost $1 billion in cash flow each year for the next couple years. clearly if sales continue to deteriorate, that has an impact on that free cash flow and there's a pressure point. somebody like jcpenney, they need to do some investment in the stores. that's where you definitely have more of a pressure. especially if sales have been falling off as they have during the holiday season. >> i've got a list here of the retailers that you think might have other difficulties, which is the most important for investors to know? which is actionable? >> well, i mean, there's always been concerns about specifics somewhere, right, that they've had pressure in their debt, a candidate in years past, especially during the recession, as potentially as filing for chapter 11. that being said, about a year
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ago they did get some investment from goldman gate capital, and that's been supportive of them. but their free cash flow has been under pressure for a while, so you continue to see that deteriorate. so we have some concerns with that one. about y but there's others out there. radio shack always coming up, always presh you on radio shack. their sales also continuing to deteriorate. but then again, they've been around for over 80 years. it takes a lot to kill a retailer, quite honestly. >> jcpenney down about 4%. some indications on holiday sales. what are you hearing, because we had oppenheimer come out earlier today defending the stock saying, you know what, at least the second half of december showed some momentum. what did you see there? >> as we started this segment, holiday sales were a little below expectations generally speaking for a lot of the retailers. jcpenney is no different. we know they've been trending worse than a lot of other
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retailers within the mall. and same-store sales have been significantly negative. there's definitely pressure on jcpenney as a result of that. what's interesting is now we're coming up on the initial hiring of ron johnson, now we're on kind of his game plan and his program going into 2013. so it will be very interesting to see how this plays out, once we're now cycling through some of his changes. we've seen a lot more discounting coming out of them recently. >> joe, just before we let you go, a lot of people were surprised at the degree to which the tax changes altered their first paycheck for this year. where does that impact in your sector? is it luxury goods that could come under difficulty? just lead us through where that takes you. >> well, what we're thinking is, that 2% payroll tax is probably the bigger impact in a sense. you know, that hits everybody. and i think that that middle to lower income consumer feels it the worst, which is why we're a little more concerned about the
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dollar stores. we're curious to see how walmart shakes out with some of these payroll changes. i think the high end will be able to change their spending levels a little bit, or adjust. maybe they dip into savings, or maybe they just shop a little less. but their pressure points are very different than what you'll see at the low end, where also at some of the restaurant operators, you'll see pressure there, because people will be eating out less. >> joe, good to see you. thank you very much. joining us there from the telsey advisory group. start of the morning positively. deutsche bank saying nice things about what they might unveil tomorrow. reversing course, currently down more than 2% after the run-up, not just this morning, but over the past several weeks. one of wall street's veteran internet and now analysts is now back in the mix. mark mahaney is joining rbc. hear what he has to say about it and how you should play the internet sector right now. stay tuned. what are you doing?
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for the past five years, marc mahaney has a new gig following his departure from citigroup in october. he's out with his first research note of 2013, outlook on the
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sector. mark joins us now from san francisco for his first interview since joining rbc. mark, it is great to speak with you. thanks for making "squawk on the street" your first stop here. >> good morning, melissa. >> we haven't talked to you since you left citi. we haven't heard from you at all. no surprise. so much has been written about how you left citi. i want to get from you, straight from you, what exactly happened? were you forced out? were you fired? tell us what happened? >> i'd rather focus on the forecast. but first, i'm thrilled to be at rbc. secondly, i strongly disagreed with that prior firm's decision. the heart of the matter was facebook. i fully stand by the calls, the work i did on facebook. i had one of the more cautious initiation reports. we did not initiate with a buy. we upgraded the stock to $20, fully stand behind the facebook work and the calls. >> one last question before we get to the initiation of coverage, because obviously that is why we have you on, and we're excited to hear what you have to say about facebook and other stocks. have you heard from regulators
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since then? is there any residual impact from that episode? no residual impact. again, happy to be at rbc, continuing to cover, as i have for the last 15 years, the entire internet universe. >> let's move on to facebook, mark. you have an outperform. we're looking ahead to the big mysterious announcement tomorrow. your price target is above $31. what do you expect to happen tomorrow, and will that propel the stock beyond what it's seen in the last few months? >> i think something mentioned it earlier, the stock is up 60% in the last three months. facebook now is a small buy for me, a small buy for us. there are other names we prefer, amazon, priceline and google. we've had a correct sea change debate. mobile modernization wasn't as dangerous to the company's
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fundamentals as the market had feared three months ago. a lot of that fear is taken out of the stock. we see limited upside to it. we still like the stock. the print is going to be key. in terms of the surprise announcement tomorrow, actually, we would be surprised, too, it's hard to know exactly what that's going to be. >> let me draw you into speculation. do you think it could be serve? and if it is, what does that mean for google? >> i think what it's unlikely to be is a hardware announcement. i think the company's been clear they have no interest in that. search, yes, search could be disruptive to google if facebook were to make a major play there. i think it's unlikely facebook would have any material success in search, in the three-year period. i think there's such a competitive mode, deep competitive moat around google's search business, i think that would almost be a waste of resources on facebook's part. >> do you think there's a chance that it disappoints people, because perhaps it will be some
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sort of costly new initiative? >> i think it's a decent bet is something they're building is literal, like a building. it's hard to know. i don't think that would cause the stock to move one way or the other. >> that would be anti-climactic if it was just a building. you mentioned facebook is a small buy at this point. in terms of your biggest buy in this universe, which stock are you most excited about in 2013 in terms of upside? >> it's amazon. one of the reasons has to do with the current valuation setup. the most important themes in the internet space this year, tick them off, international turning less worse from last year. secondly, mobile, for the first time, mobile eclimsed 10% of all retail sales in the fourth quarter. now, retail -- i'm sorry, mobile has been a clear positive for google. a lot of incremental sales. the move toward same-day delivery, there was a prior segment that you ran on the
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problems with cash flow in retailers. there's a major force coming here. it's amazon's ability to deliver next day and then same day. that's a huge positive development. they've been building it for years. it's a huge positive development for amazon. major, significant dislocation for physical retailers. >> what about the online travel agency? i see you've got an outperform on expedia, and a $70 price target, despite the run-up we've had there. priceline outperformed trip adviser. set to perform? >> across all these stocks, we've had pretty major moves. in 2012, it was a very strong year for most internet stocks. now, the facebook ipo, that was not in that group. neither was group-on. most of the stocks really well, particularly expedia. we think the risk/reward is here on priceline. 80% of priceline's revenue, if you believe we've got an international markets recovery, this is the single best stock to own in the internet space. >> and google is your third top
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pick, mark, is that correct? >> yeah. i don't think there's that much change to the google thesis other than to the extent that mobile gets a little bifurcated and there's more tablets than smartphones. you've taken away the cpm, cpc that the market feared with google last year. secondly, very interesting thesis, tv ad budgets, because of youtube, google is well positioned for that theme. and then third, people love cloud computing as a play. they look at amazon correctly as a derivative. we think google is also a derivative on that. they're generating more revenue off cloud computing services to companies than people realize. as the market focuses on that, that's upside the google stock. >> the wild card with google is obviously with what happens with the regular larters in europe, because they've done a deal with the ftc. it's likely to be much more harsh. today we've seen u.p.s. abandon its buy in europe, again at the hands of the european regulator. do you think people underestimate the damage they
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could do to google's business here? >> i don't think so. but you're right to raise it as an issue. one down, one to go. the u.s. regulators seem to have backed off of pressure against google. you're absolutely right, simon, the european regulators will have higher bar. it's hard to see, though, what the change that google would have to make. they may have to do more disclosure. it's not like there's an obvious asset for them to sell. it's clear they're providing a positive experience and positive value for consumers. competitors hurt, yes, but not consumers. >> there is the difference between what happens in the united states and -- is the consumer benefiting or not, in europe they go, we need more competition regardless. >> absolutely, simon. i'll make the one simple point. google's multiple, i would argue, has been held down relative growth rates traded at significant growth rate for two or three years.
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they've viewed it as microsoft v-2. i think its in some ways the stock is immune to it. >> mark, last question when it comes to amazon. you mentioned cloud. i'm wondering if at a certain point you think there's a chance amazon will start kicking off providing services to some of the competitors, such as a netflix or other online retailers? >> i think actually the most interesting new part of amazon web services is the knock against it from a competitor, that it's been focused on small businesses, startups. starting at the end of november, amazon announced they will provide services to large enterprises. i think you're going to see much greater traction for amazon web services in the large enterprise market because they're coming after it with much lower price points than existing solutions. i think this is a new area of growth for amazon. >> mark, great to speak with you. >> thank you, melissa. >> thank you for your time.
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do you have a co-worker out sick today? join the club. the cdc is saying there's widespread flu activity in now 49 states. so how are hospitals and clinics handling the rush of patients. dr. dominic rocco is co-owner of the doctor's office urgent care clinic in new jersey. he said their walk-ins have tripled since the flu outbreak. you're at three locations, is that right? >> that's correct. we just opened up a new one this week. >> what's happening? >> we've seen tremendous influx of patients. our volume has doubled to tripled overnight. it's been very difficult to keep up with the volume. we've had to bring in additional staff. and additional physicians and
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assistants staffing. >> just to be clear, are you treating patients with flu here or also providing the inoculations, the vaccines? because yesterday i was cueing up to get mine, and they said the vaccines, the stocks have basically run out for a lot of manhattan. >> we've seen a combination of both. first, we've seen a tremendous influx of patients who are sick with the flu. with flu-like syndromes. and we've also seen a lot of patients just coming in because they need the flu vaccine. i think we're also seeing a lot of patients who are going to local pharmacies where they usually have received the vaccines, but the local pharmacies have run out. so they're really looking for a place to get the vaccine. and because the vaccine is on back order for a lot of different locations, it's been difficult for a lot of patients to actually get the vaccine. >> doctor rocco, talk about the vaccine and its suitability to the strain of flu that is most common right now. is it effective in combating this particular strain that
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seems to be gripping the country? >> it looks like it's about 62% effective. so one might say, well, 62%, that's really not so great. but i would make the argument that 62% is actually tremendous, compared to someone who doesn't receive the vaccine who really is very vulnerable at 0% defense against the flu, this really raises your chances of not getting it. and if you do receive it, and you do actually get the flu, there's a good chance that the flu that you get, the symptoms are going to be much less. you'll be sick for fewer days and your fever will be -- your symptoms -- you'll feel much better. and it will not be anywhere near as severe as if you had not received the vaccine. >> right. so let me ask you, as somebody who has not gotten a flu shot because i have not yet. if i wait for new stocks to come in, are those vaccines better suited to the flu? do they then become more effective as the flu season goes on? >> no.
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the vaccine is the same vaccine that's being produced by the pharmaceutical companies. usually the world health organization will try to predict which strains are going to be the predominant strains. about a year in advance. and then it takes the pharmaceutical companies about -- probably about six months to produce the vaccine. once it's in production, it's not being modified until the subsequent flu season. >> the same vaccine you could have got last august, effectively. before we let you go, dominic, does this make you a rich man? vaccines are a high man business, aren't they? >> we really don't make much money from the flu vaccine. we only charge about $20. so we barely make much more -- we think it's a good service for the community and that's what we're there for is provide good service for the community. we think it's important for the general population to be vaccinated. >> we'll let you get back to that. dominic ruocco, thank you for joining us. >> my pleasure. thank you. i was trying to rationalize not getting the flu vaccine and
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the benefits of waiting. but i guess i'd better go ahead and get one. >> we gave in. >> you got it together? >> no, i picked up mine in november. >> all right. still ahead on the program -- i should get a vaccine -- goldman sachs, what they're advising their investors to do with their money. fers
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welcome back "squawk on the street" with santelli here. the president's going to be speaking in a little bit. and i really enjoyed a piece that steve liesman did today regarding the debt ceiling because we've all had these discussions. and in the end there's a certain morality to this discussion. and i think it's the reason the fiscal conservatives aren't going to do very well trying to push the government doors closure. think about it. we went through a campaign election season where 55 to 80 billion a year taxing the rich was the centerpiece. that's what it was all about. and yet on the moral high ground we see this horrible disaster on the east coast.
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we see staten island, these people need help. what's the price tag for one year? about the same amount that the campaign was fighting over for a year and a half. now i understand moral high ground. it's with us every day. let's look at health care. today there was an op-ed in "the wall street journal" about the cost of obama care. there's continuing articles on the cost of dodd-frank, transactions for real estate. in the end, the moral high ground is a very big argument. steve liesman's center piece was, how the spin, so to speak, is going to be about the word default. and he's absolutely right. there's a certain default on interest payments. that's a legal default. but when you don't send the checks to people on social security or medicare or you don't send checks to veterans or you don't keep veterans hospitals open, that's a moral issue. it's going to be impossible to beat that. and in the end it comes down to a philosophical argument nobody
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really wants to have. and when we have it, people make fun of the argument. but the argument is, socialism. to help the collective by doing something to the few is the very cornerstone of socialism. whether right or wrong. there's a moral high ground that we're that going to be able to beat. if entitlements and people are putting in less in entitlements than they're pulling out, and they're poor, or they have infirmities, we understand that. but there's one final chapter to this and that's the morality nobody ever discusses because the people aren't here to fight for themselves. the morality is, when you run out of other people's money, what next? what's the barometer of other people's money? it's the debt. and who owns that? those yet not born. to me that's the highest moral ground of all, and anybody who has questions about it, just look at a few tapes of mr. milton friedman, or read ayn rand's atlas shrugged. because by the time the country
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wakes up to the notion of the difference between capitalism and socialism, the collective versus the individual, when we get the bill, it will be too late. back to you. >> rick, grover norquist later in the program, as well. rick santelli live in chicago. she's been dubbed fashion's fairy god marry and now she's bringing the hottest designer fashions straight from the runway to your closet before anyone else can get them. the cofounder and ceo of modus operandi will join us live right after the break. [ male announcer ] it's simple physics... a body at rest tends to stay at rest...
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have you ever wanted to buy a look straight off the runways? well, now's your chance. moda operandi was launched in 2011 with a vision to empower fashion aficionados worldwide by helping designers connect with customers directly online after fashion shows. the women's retail site is the only place that lets customers preorder high-end apparel and accessories straight off the runway. before they're available anywhere else. it's a luxury fashion showcase of the latest looks for those who can afford to want them the most. >> and aslaug mass news dotter joins us as part of our continuing squawk on the verge.
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she is the ocofounder and ceo o moda operandi. it's almost the perfect day to have you because some of the gowns that were worn last night on the golden globes are now through sale through you the exact same dresses, is that right? >> yes. many of those gowns will be for sale on the site this week. that includes the beautiful zak posen dress that naomi wall streets wore in a deep, blood red. allison williams wore a black jay mendel. those and many more beautiful dresses will be available on the site this week. >> i love the story of how this business model of yours got started. because your originally the story was you were hearing from designers who made these beautiful dresses and then the retailers eventually would say, for whatever reason, we don't want to order enough, we don't want to order them at all and you essentially took out the middle man in a big way, right? >> absolutely. this model was very much about the designer, but also about the
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customer. there was a disconnect there. there's a designer making these beautiful pieces, wanting to sell those beautiful pieces, and a customer who wanted to buy these pieces. so it made absolutely no sense that it couldn't happen. >> let's say i'm a customer who would love to buy that black dress. how much does it cost? >> which is true. >> which is, yeah, a little bit of truth to that. how much would that cost? are they available in all sizes or is this limited quantities? >> the beauty. our model, because this is preorder, can offer the dresses in any size that select from a size zero to a 12 or 14 depending on the range of the designer. >> i'm trying to work out what the difference between what you're doing is and what natalie is doing. it seems to be more or less the same thing. how many of you are there in this space? and are any of you different? >> our business model is actually very different. because our core model is about
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preorder. it's about allowing the customer to shop from the full runway collection, immediately after runway show, and before it's available at retail. >> you actually show the runway show live and you can buy it online? >> no. typically net a porter is taking inventory so they make their select as a traditional retail store would do and they sell those pieces. we're giving access to the full collection, allowing the customer to be the buyer. >> fascinating to watch. we didn't get a chance to talk any financing or business per se but please come back. >> i'd love to. >> thank you so much for having me. >> what's coming up tonight? >> a lot of apple. we've got the technicals, one shareholder who last year said the decline we saw in the fall was the beginning of a multiyear decline in the shares. we'll see where he stands now. the technical take on apple. and dennis gartman says now is the time to buy stocks. see what he's buying. >> see you tonight. simon see you in 30. let's get to the third hour of
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"squawk on the street." it starts right now. >> and we are live at post nine at the new york stock exchange. quick check on the markets, awfully close to the flat line. the dow with a gain of about one point. 1.25. s&p is down a little more than that, off three and change. nasdaq is off about 12. the president's going to give a news conference at the white house in little less than half an hour, urging congress to raise the debt ceiling. we'll take that live, of course. ubs downgrading the stock to neutral from buy. jpmorgan taking it to neutral from overweight. jpmorgan citing slowing revenue. keep an eye on rig. transocean spiking after news carl icahn is taking a 1.5 stake in the company, may increase the stake above 5%. so he hopes. apple hovering near the $500
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mark following reports the company's cutting orders on iphone components because of weak demand. as apple finally lost its cool factor? ? the publisher of nine to five mac will join us to weigh in. goldman's wealth management ceo explains even with its current economic problems the u.s. is still miles ahead of the rest of the world. then the anti-tax man himself grover norquist reacts to the president's statements on the debt ceiling, the new payroll tax hike, and a lot more. but first we'll take a look at how apple is trading right now. it did dip below 500 this morning after the company cut orders on its iphone five screens and some other components today. what is the best way to play the stock going forward? seth weintraub is the pick lisher of nine to five mac. he joins us this morning. >> good morning. >> my first question is, is this new news or not? >> well, there were similar reports from chinese news sources over the past month.
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so i guess it's now more official that "the wall street journal" reported it. although it is still a little bit in the u.s. >> a lot of discussion about whether the market is discounting the same headline twice today. what does it say about demand for the iphone five specifically, and then what does it say about demand for anything with the apple logo on it over the next few years? >> well, investors are clearly spooked. there's a lot of different things that may be scaring them. we've been hearing some stories about apple going to a two per year upgrade cycle, instead of, you know, the ipad 4 came out six months after the ipad 3. so maybe the -- will come out sometime in march. so that may have something to do with cutting component orders. there's a new part coming out or new product. so there's a lot of things.
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and "the wall street journal" did look at the figures, so cutting orders in half, may be, you know, apple is overly, or there's a lot of different things that could happen there. >> yeah. let's talk for a minute. obviously looking at the stock at 506. is it clear to you. i know your world is apple, but is it clear to you who is winning as a result of their now relative weak position? is this all going to samsung? is this going to google? is rim a factor here? who's -- who's up because they're down? >> i don't think rim or even microsoft are really a factor yet. i don't think they're even, you know, in the 10% range combined. google obviously is a strong player, and samsung is kind of the black bear for google with the android os. it's not clear the numbers that
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we've seen from com score and the others don't really indicate that apple is really losing ground. it's more that they're keeping the same or even gaining a little bit against rim and microsoft's losses. so numbers wise, i don't see any downside to apple at this point. there's no -- there hasn't been any indication that apple's dropping market share. >> right. certainly some investors would clearly disagree. but we'll keep an eye on it. thank you so much for your time. >> no problem. >> seth weintraub. meantime mercedes-benz making a big splash at the detroit auto show from a more affordable mercedes to a debut of the e-class. phil lebeau has another first on cnbc interview with dr. z. good morning. >> thank you, carl. i'm joined by the chairman and ceo of mercedes-benz and you just introduced the e-class here. talk about that in a bit but first i want to show people a little bit of video from last
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night. the cla class, because we're not seeing it on the show floor. tell me why this is so important for you. >> the cla is a new entry for the mercedes brand. it's a four door coupe, very elegant, very emotional, at the same time excellent fuel efficien efficiency. i think it's almost a must-have vehicle for people who could not afford to enter the brand of mercedes before so it's great opportunity for us. >> we'll probably see it somewhere in the september/october time frame here in the u.s. did you feel like you had to do this, given the competition at that entry level luxury segment has become so fierce here in the u.s.? >> i would say it's less because of competition, but just going for an incremental opportunity, which we can benefit from and that we would -- that, of course, will win our customer some competition, is a nice cream of the crop. >> we were talking earlier about the slew of new models in the luxury segment here in the u.s. and around the world. and the question becomes, do you grow that pie? can the luxury pie grow in order
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to make everybody say, yeah, we can take our stake here, or are we hitting a point where we're going to start to see even more incentives? >> i think for a long period of time we have seen above average growth for premium manufacturers. and to some extent, that is due to the fact that we reach further down going to compact car segments with premium offerings and that, of course, gives us incremental opportunities. on top of that, of course, china and other emerging markets are heading. >> one last question for you. you're right there in europe. you know what's going on. you told me something when we started this interview. you think perhaps we're seeing the bottom in the second half of this year? perhaps we see the beginning of a rebirth. >> of course there's further risk out there. but i do believe there's a fair chance that as you said in the second half of this year, we could start seeing some economies get traction again. of course, some of the very badly hit economies like greece, it will take longer. but europe i think should
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improve. >> the chairman and ceo of mercedes-benz joining us first on cnbc. the e-class rollout here earlier today. i'm not sure that i have ever seen an unveiling with as many people as were jammed in here to the mercedes stand today here in detroit. back to you. >> that is a big deal, phil. you've seen your share of unveilings, that's for sure. phil lebeau in treat today. one food company on the move, let's get to kayla tausche who is manning the market flash desk. >> watching flowers foods. that's a southern food company, flo. about $4 billion in market cap, that stock up more than 6% hitting an all-time high on its first trading day after signing an agreement to acquire the majority of the bread businesses from hostess brands. that includes wonder bread. of course we're still waiting for some of the other bidders for some of the other units to be announced. right now flowers is the bid to beat and if no one else comes in higher it will walk away with the majority of those breads. >> all right, thank you very much, kayla. when we come back, goldman's
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private wealth management cio here to explain why the u.s. economy still has a solid advantage over the rest of the world. but first, reck santelli is working on something for a little bit later on. and it's a good one. right, rick? >> absolutely. in about 10, 12 minutes we're going to be talking to grover norquist. i want to talk to him about some of the technicalities to the pledge, and the very notion that if that's the game plan of fiscal conservatives how many great generals in history give the plan away before the battle? maybe it needs to be changed? i don't know. we're going to ask grover. you're probably going to want to hear his answer. ss in argentina, change engineering in dubai, aluminum production in south africa, and the aerospace industry in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing.
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want to get to our capital markets editor gary kaminsky with share minimum mossavar-rahmani. >> carl, good morning. as we continue to try to talk to people who called it right last year, as you mentioned sharmin, within goldman sachs, sharmin is responsible for the high net worth division. so if you're a client in that division, this is a strategy device you're foreing hard 2013. good morning. let's get right to expected returns. we've got some charts in terms of the various asset classes and anything you want to highlight in terms of expected returns, what you're telling clients for the next three to five years? >> in this environment, we're actually asking our clients to think about three things. first we're going to have low interest rates for awhile. so they need to adjust their expected returns. so in a low interest rate environment we're going to have lower returns across all asset classes. second, we're telling our
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clients that as they think about the lower returns in the context of their portfolios, they also need to recognize that we are going to have volatility from incremental policy on a global basis. whether it's in the u.s., europe, japan or emerging market countries. we are expecting that policy, whether it's monetary policy adjustments, fiscal policy, it will all be incremental. and that will create market pressure because it won't be at a pace that the markets would like to see. so that will introduce volatility. and it's not something our clients should try to trace. they should look over the horizon and invest for the long run. >> looking at the long run, three to five-year term outlook if you look at those expected returns, what's interesting to me is that you think the euro stocks, certain areas of the euro stock index as well as the banks, the financial services companies, you can, if you're willing to accept some volatility get the highest returns over that five-year period. so the euro stock, explain to us why you like that area for outside returns? >> the investing in u.s. banks
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and the euro stocks 50 is in the context of low returns across asset classes. but only for tactical recommendations. our core assets should still stay in the u.s. so for core assets, u.s. equities, u.s. high yield are the best places to be. but at the margin we like the returns in the low to mid teens of european stocks, and u.s. banks. with european stocks our view is that they are trading at very cheap levels. european stocks today, in the euro stocks 50, global multinationals, are at a 50% discount to the u.s. typically they trade at a 33% discount to the u.s. on average. so there's tremendous upside potential, and half the revenues of these global multinational companies come from outside of europe. and so while they're getting tainted because of the european sovereign debt crisis we actually think that they have very good wrof set. we've had this recommendation on for about a year. but we think that when we look at the next five years, we're
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looking at 12% to 14% annual return. >> let's talk about the banks for a second. obviously great performance last year by financial services companies. you believe, like many, that the expectations are capital redeploy. dividends, distributions growth. companies being able, once again, to reward shareholders. is that not priced into these financials and these bank stocks right now? >> so it's an interesting question regarding the fact that banks have done well and we've actually had this recommendation on also for awhile. however, we think there is still more to go. banks are trading, on average, we're talking about u.s. banks, at about one times book. even if they were to have more in line like utilities, 10% to 11%, we actually think they can trade at 1.4 times book easily. if you look at that over the next three to five years you're talking about 14%, 15% returns. so we think there's still more upside in addition to valuation we think banks will benefit from the continued recovery in the housing sector. and we also think that as these
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stress test results come out again before the end of march, they will be able to do dividends and buybacks and i don't think it's all priced in at this moment. >> let me ask you one five sof cal question, say i'm a client of the bank at gold man sachs, like many people i probably bought a lot of bonds because i was very concerned about my own money, wanting capital preservation. i look at the s&p. it's up 100% from the lows of 2008, 2009 and i say to myself, i know i'm too allocated right now in fixed income. should i really be buying stocks at these levels. what do you tell me? what do the high net worth advisers tell a client in a situation like that? >> one of the most important things we have done this year for our clients is to show them five-year numbers. and we're telling our clients that as they look exactly as you say, look at bonds, look at equities, they need to look over the horizon for the next five years. and over the next five years we expect basically zero returns on a nominal basis out of bonds, which actually means a negative real return but when we're looking at equities, in spite of
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the tremendous run-up from the trough of the crisis we are looking at 5% to 6% annual returns. and so we encourage clients to think about that relative performance. over the foreseeable future. and slowly move out of their bonds, into equities. we don't think there's great urgency to do that right away. they can do it in increments. but we think that that will be a very good long-term strategy. >> do you see clients actually making this tactical move right now? >> more and more we're beginning to see people say, okay, the worst of the crisis seems over. policy seems to be in a good place, we're seeing the economic recovery have some serious legs to it. housing seems to have some serious legs. we can afford to take a bit more risk now. >> great. thanks very much for joining us. carl, that's some actionable advice from goldman sachs. high net worth for the retail clients. by the way, both in terms of the euro stocks as well as bank stocks are retfs, sharmin's work will tell you those sectors, if they're right in terms of
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absolute returns, significant outperformance in the years ahead. >> i hope everybody was listening closely, gary. great, great stuff. thanks sharmin. what a pain in the paycheck. the payroll tax hike feeling like a lot of pay cuts for americans. what will it mean for consumer spend being and the economy's future? talk about that when "squawk on the street" comes right back. [ male announcer ] you are a business pro. omnipotent of opportunity. you know how to mix business... with business. and you...rent from national.
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tick you to a live shot of the east room at the white house. the president set to speak in his last press conference of his first term, beginning at about 11:30 eastern time this morning. discussion said to involve everything from the debt ceiling and taxes to his cabinet selection, to immigration and guns, no doubt. we'll bring that to you live when it begins in about nine minutes. although the president is known for being a few minutes later than expected. in the meantime we'll go to rick santelli in chicago with a very special guest. rick? >> thanks, carl. i like to welcome grover norquist, welcome to my segment, grover. and i'd like to play some pepper
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versus long winded here. so real quickly let's go back and forth. were you pleased at the way it all turned out on january 1st with regard to the pledge and how it was dealt with on that vote in the house? >> well, given that the president had all the cards i think taxpayers did fairly well. of all the tax cuts 2001, 2003, amt, they were all temporary. 85% of the dollar amount, 99% of americans, got permanency moving forward. so, that's not what we wanted but a lot better than we could have ended up with. >> i like the way you framed it. president has all the fire power and i think you're right. >> he did. >> i think the pledge is easy to attack because it can't assimilate. you know, i think the u.s. has the greatest military, not necessarily because it has the most fire power but it has the greatest adaptability. so grover my question to you, being a fiscal conservative is, how are you going to adapt? the moral high ground argument is impossible to beat. the president said he wouldn't raise taxes on everybody. he did raise taxes on everybody.
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he still has the moral high ground. it's about spending. which is just future taxes. how can that pledge be changed? you're not going to be able to combat the debt ceiling with a static pledge. >> okay. well the good news is, that moving forward we're going to have a four-year struggle against the president's overspending. and we have three days, three battles that we know the day of. march 2nd is when the sequester begins. watch the president try and weasel out of the sequester, that it was his idea, and he agreed to it -- >> doesn't matter whose idea it is. how are you going to get on the offense? see i'm with you. i'm a fiscal conservative. but you're on your back feet. >> no, no. the sequester takes place automatically unless something else happens, saving $1.2 trillion. debt ceiling which comes up around march 14th, fuzzy day but roughly march 14th, there the republicans have said for two years now, because the president's busting the budget with all his spending he's going to have to cut spending by the same dollar amount as his debt ceiling. if he tries to weasel out of the
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agreement we had two years ago on this subject, it's not going to work, that's where the republicans and the american people stand together against obama's overspending. third thing -- >> the argument is about refault. let me stop you right there. steve liesman framed this completely accurate. default is a legal term should only mean the debt. but the moral obligation default is going to be the main story. and that's the story that the republicans need to be prepared for. how can you better prepare them for that? they're not going to win by closing down the government, are they norquist, grover? >> i don't think they'll need to. we have this fight a year and a half ago and the taxpayers won and obama lost. we're going to have this fight again. obama wants to keep spending crazily. he wants to have more solyndras. the answer is no. and the only person who can default is obama. when we hit the debt ceiling they're not allowed to borrow anymore. you don't not pay your mortgage if you get a 10% cut in your
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salary. you reduce other things. you pay your debts first and then you deal with other spending. the president's tried to turn that upside down by saying he would cancel the debt. he can't do it. he won't do it. he's lying when he says that's what he will do. i think we have a conversation over the next two months reminding the american people that we will pay our debts but we won't pay obama's crazy overspending. >> the people are in charge. whether it's jack lew or tim geithner if you remember what happened at the end of 2011, it was an issue where you're going to be watching on tv that the soldiers that protect our freedom, are they going to get their check? soldiers that came back wounded from the first gulf war, are they going to get their check? that is going to be the issue on the front page, grover, is it not? >> and august of 2011 we had all the same screaming. i did all the television shows where people said taxpayers are causing the problems. i said the president is. we won, he lost.
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we got the spending cuts which he's trying to fight still but he got his debt ceiling only because spending cuts were attached to it. that will happen again. of course the president threatens to destroy everything if he doesn't get his way. that's what he always does. but he lost in 2011. the american people and taxpayers will win again this time. >> i know but he won in november and that's the issue. i think the strategy needs to be more accommodative. even though as a fiscal conservative i'm with you. thanks for playing, grover. >> taxpayers won the house of representatives. he just got the white house. >> i agree with you. but you know, i think i'm voting on january 1st, it might have been a technicality. they would have been in stronger hands doing the 1 million earlier, the pledge in that instance i think didn't help us it hurt us a bit. >> no, no. the pledge did not get in the way of that. i endorsed that and there was not a problem with the pledge. >> -- technicality and i don't like higher taxes but it made the republicans weaker in my opinion. >> they should have gone with started to negotiate from the million, yes.
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>> all right. carl it's all yours. >> gentlemen, thank you so much for that. when we come back the bell's sounding across europe. in a moment we'll get that close and the impact on the trading this afternoon. and then, of course, the president's press conference at the white house. but with so much health care noise, i didn't always watch out for myself. with unitedhealthcare, i get personalized information and rewards for addressing my health risks. but she's still going to give me a heart attack. that's health in numbers. unitedhealthcare. ♪ ♪ ♪ [ male announcer ] some day, your life will flash before your eyes. ♪ make it worth watching. ♪ the new 2013 lexus ls. an entirely new pursuit.
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>> going to be a lot to watch this week whether it's earnings or economic data. some of it from the u.s. some of it from europe. >> totally. what's interesting at this stage is this very, very strong rally that you've had so far this
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year. peripheral europe in both the bonds and stocks. just taking the close. >> the european markets are closing now. >> you will see it is negative territory for spain and italy today. i want to emp emphasize how powl the rally has been so far this year and how you are essentially booking profits on that rally. take for example the italian and spanish stock market, both of which even with the profit taking today are up to 6%. the s&p here, blue chips in europe are up only 3, to a very, very strong rally. and the rally has continued into the bond markets, as well. the short-term, the short end of the bond market, you can see a substantial move lower on both those countries two-year debt which is the area of which the ecb would intervene. it's also true of the ten year. so you're beginning to get notes from, for example, deutsche bank suggesting such is the level of
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confidence in europe at the moment. they do not believe that the european central bank will have to intervene physically in the markets in the first quarter. now that is a huge development if that were to be true. now, there are risks to that. the first risk is the italian election. will they vote against austerity next month? the second risk to this confidence is that you don't get growth materializing says deutsche bank in the spring. the third risk is the social cohesion of these countries will break apart. let me take you to athens and give you an example of what has happened so far today. unidentified attackers opened fire today on the headquarters of greece's governing new democracy party, with kalashnikov assault rifles. nobody was hurt. but we do know that a bullet went through the window that is used of the office of the prime minister. there have been bomb attacks on journalists over the weekend. these are marked risks further down the line, if they change
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the way that people vote, or they think about austerity. and that's the sort of thing that we need to keep an eye out as the risk in 2013. just a corporate here, we've covered during the course of the program that ubs, because of the regulators in europe, is abandoning its $6.9 billion bid for tnt express. you can see the way the disappointment there and the stock moved down, post the dutch post office also holds a stake in that, which is why they have similarly moved into negative territory. carl, one more thing that i want you to mention to you and that is prime minister david cameron in the united kingdom is due to have a major speech next week in which we thought he might put out the possibility of a referendum that the uk would leave the european union. today, he appeared to have climbed down on that. it will not be now, we believe, an all or nothing proposal. and it will be for after the next general election in the uk. >> all right. keep an eye on that, as well. simon, thanks a lot, simon hobbs here at post nine. check on energy and commodities
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as well. jackie dean lice is at the nymex for us. >> the energy is looking higher. crude starting stronger and taking a turn after the equity markets opened. looking at wti hovering around the flat line. traders saying the key level to watch is 9420 and 9470. that range is a key resistance level. now keep in mind that today's high was 9429. so we broke through that point but no catalyst to keep us above that. meantime traders not expecting any meaningful move in crude prices ahead of wednesday's opec monthly report. also natural gas. we are seeing a rally today. some traders are saying this is a short squeeze while others are saying it's buying ahead of a six to ten-day period, we're going to see the temperatures get substantially colder. and last but not least i want to touch on metals. higher in both gold and silver but a move lower in copper. little bit of dollar strength weighing on copper there. that, of course, tempered by the fact that traders are hoping for
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economic growth out of china. which is the biggest consumer of copper. carl back to you. >> jackie, thanks so much. jackie deangelis over at the nymex for us. >> we've learned some things, a little more defensive tone. we're about even on the advanced decline line. techs are notably weak because apple is leading things to the downside. here's the major sectors right now. notice, health care holding up very well, consumer staples, of course, and we're about 50/50 on the advance decline line. about even on the advance decline line. techs, apple did break 500 right at the open. but it's above that right now. there's your major tech stocks here. 504, some of the chip names are weaker. some of the big equipment makers that are out there are also on the weaker. teradyne. i got a lot of questions about hewlett-packard and what's going on with hewlett-packard. hewlett-packard has been a monster since january 2nd. we're up 17% on the year.
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so far for hewlett-packard. far and away the best performing stock in the dow jones industrial. i think pfizer may be up 7% or 8%. that's number two. today the immediate reason was an upgrade from jpmorgan. but it was the most grudging kind of upgrade that you could possibly imagine. take a look at what they said here right out of the gate the company said, jpmorgan said the headline news cannot get much worse. that's the reason they upgraded it. it's a very funny report in a way. and they also went out of their way to note that a positive turnaround is likely to be measured in years. this is hardly any kind of enthusiastic, things are turning around kind of story. they talk about the need to divest other segments, including printers and largely pcs. here's what's really going on here, it's not just today. put up the next full screen. i'll give you, this stock has been beaten up so badly, that it's an interesting play. dell and hewlett themselves have been so underweight by the market that nobody owns it, nobody wants to own it. that's when you want to buy it.
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that's why it's been up all throughout the beginning of january. out of tech winners, so i'm just mentioning emc and ibm for example, big tech winners last year. and that's how you get a quick pop in the beginning of the year. that's what some of the smart money has been doing. not just the upgrade from jpmorgan, this has been going on since the beginning of the year. everybody's negative. now is the time to get a little more positive on the group. finally, carl, i know of course the president is having a press conference. but everybody when i came in this morning wanted to hear what bernanke is going to have to say at 4:00 today. of course he's going to be talking about monetary policy and is he going to come out and talk a little bit more about what's going on and whether there are -- how much dispute there really is about ending the bond purchase program that's out there. that kind of, to me, was the big story today, well the traders want to hear about it. >> taking some q&a? >> that's after the close. >> bob, thanks a lot. outrage over actually seeing a reduction in pay checks due to this bigger fiscal tax a big hot
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button today. how is it going to impact consumer spending? let's bring in diane swann, senior managing director with mesereau financial. we may have to break away for the president. but in the meantime, you think consumer spending is going to lag, the big question is, to what degree consumers have savings to soften the blow, right? >> exactly. and certainly the high income consumers have a lot more savings to cushion the blow. they don't tend to reflect a change in their tax code as much as low income consumers. i think the real shock is many people forgot that they had a payroll spending holiday, tax holiday, and as a result we saw in 2011, about 40% at most of the taxes were actually spent in the u.s. economy. as we moved into 2012 it looks like a lot more of that was spent. i think the real shock is when the paychecks come in, they're a lot smaller and it means a lot less discretionary spending for middle and income households. >> when people think of the
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american consumer i don't think they envision someone who has a large nest egg of any kind to supplement their spending. >> that's exactly right. the one thing that is a game changer for many households is housing prices are rising instead of falling. and wealth effects do temper that. the effects on spending. but for the most part these are consumers that are being hit the hardest, ones that have already been very strained and have cumulative effects of maybe somebody who is unemployed that's been in their house and trying to support them, as well. so i think that's where the real problem is, is that you've been, you know, you've got a long period of time with long-term unemployment still high. although it's coming down. not coming down rapidly enough. i think that's what you're going to hear a little bit from ben bernanke a little while. >> we're about to hear from the president obviously the thinking at the end of 2012 was once we get past the cliff there's going to be this wave of cap-ex spending. now the question is whether that comes after some sort of debt ceiling compromise. do you see that happening no matter what happens actually? i apologize for this diane.
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here's the president. >> i thought it might make sense to take some questions this week, as my first term comes to an end. it's been a busy and productive four years and i expect the same for the next four years and intend to carry out the agenda i campaigned on, for new jobs, new opportunity, and new security for the middle class. now right now, our economy is growing. and our businesses are creating new jobs. so we are poised for a good year. if we make smart decisions and as long as washington politics don't get in the way of america's progress. as i said on the campaign, one component to growing our economy and broadening opportunity for the middle class is shrinking our deficits in a balanced and responsible way. and for nearly two years now,
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i've been fighting for such a plan. one that would reduce our deficits by $4 trillion over the next decade. which would stabilize our debt, and our deficit in a sustainable way for the next decade. that would be enough not only to stop the growth of our debt relative to the size of our economy, but it would make it manageable. so it doesn't crowd out the investments we need to make in people and education and job training and science and medical research, all the things that help us grow. step by step, we've made progress towards that goal. over the past two years i've signed into law about $1.4 trillion in spending cuts. two weeks ago i signed into law more than $600 billion in new revenue. by making sure the wealthiest americans begin to pay their fair share. when you add the money that we'll save in interest payments on the debt, all together that adds up to a total of about $2.5 trillion in deficit reduction
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over the past two years. not counting the $400 billion already saved from winding down the wars in iraq and afghanistan. so we've made progress. we are moving towards our ultimate goal of getting to a $4 trillion reduction. and there will be more deficit reduction when congress decides what to do about the $1.2 trillion in automatic spending cuts that have been pushed off until next month. the fact is, though, we can't finish the job of deficit reduction through spending cuts alone. the cuts we've already made to priorities other than medicare, medicaid, social security and defense mean that we spend on everything from education to public safety less as a share of our economy than it has -- than has been true for a generation. and that's not a recipe for growth.
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so we've got to do more both to stabilize our finances over the medium and long-term, but also spur more growth in the short-term. i've said i'm open to making modest adjustments to programs like medicare to protect them for future generations. i've also said that we need more revenue through tax reform by closing loopholes in our tax code for the wealthiest americans. if we combine a balanced package of savings from spending on health care, and revenues from closing loopholes, we can solve the deficit issue without sacrificing our investments in things like education, that are going to help us grow. turns out the american people agree with me. they listened to an entire year's debate over this issue and they made a clear decision about the approach they prefer. they don't think it's fair, for example, to ask a senior to pay more for his or her health care, or a sincientist to shut down
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life-saving research so that a multimillionaire investor can pay less in tax rates than a secretary. they don't think it's smart to protect endless corporate loopholes and tax breaks for the wealthiest americans rather than rebuild our roads and our schools, invest in our worker skills or help manufacture hers bring jobs back to america. so they want us to get our books in order in a balanced way, where everybody pulls their weight, everyone does their part. that's what i want, as well. that's what i've proposed. and we can get it done, but we're going to have to make sure that people are looking at this in a responsible way, rather than just through the lens of politics. now the other congressionally imposed deadline coming up is the so-called debt ceiling. something most americans hadn't even heard of before two years ago. so i want to be clear about this.
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the debt ceiling is not a question of authorizing more spending. raising the debt ceiling does not authorize more spending. it simply allows the country to pay for spending that congress has already committed to. these are bills that have already been racked up and we need to pay them. so while i'm willing to compromise and find common ground over how to reduce our deficits, america cannot afford another debate with this congress about whether or not they should pay the bills they've already racked up. if congressional republicans refuse to pay america's bills on time, social security checks and veterans benefits will be delayed. we might not be able to pay our troops or honor our contracts with small business owners. food inspectors, air traffic controllers, specialists who track down loose nuclear materials wouldn't get their paychecks.
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investors around the world will ask if the united states of america is, in fact, a safe bet. markets could go haywire, interest rates would spike for anybody who borrows money. every homeowner with a mortgage, every student with a college loan, every small business owner who wants to grow and hire. it would be a self-inflicted wound on the economy. it would slow down our growth, might tip us into recession, and ironically, would probably increase our deficit. so even entertain the idea of this happening, of the united states of america not paying its bills, is irresponsible. it's absurd. as the speaker said two years ago, it would be, and i'm quoting, speaker boehner now, a finance ral disaster not only for us but for the worldwide economy. so we've got to pay our bills.
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and republicans in congress have two choices here. they can act responsibly and pay america's bills, or they can act irresponsibly and put america through another economic crisis. but they will not collect a ransom in exchange for not crashing the american economy. the financial well-being of the american people is not leverage to be used. the full faith and credit of the united states of america is not a bargaining chip. and they better choose quickly because time is running short. the last time republicans in congress even flirted with this idea our aaa credit rating was downgraded for the first time in our history, our businesses created the fewest jobs in any month in nearly the past three years, and ironically, the whole fiasco actually added to the deficit. so it shouldn't be surprising given all this talk that
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american people think washington is hurting rather than helping the country at the moment. they see their representatives consumed with partisan brinksmanship over paying our bills while they want us to focus on growing the economy and creating more jobs. so let's finish this debate. let's give our businesses and the world the certain ty that or economy and reputation are still second to none. we pay our bills, we handle our business, then we can move on. then america has a lot to do. got to create more jobs, boost the wages of those who have work. we've got to reach for energy independence. we've got to reform our immigration system. we've got to give our children the best education possible and we've got to do everything we can to protect them from the horrors of gun violence. and let me say i'm grateful to vice president biden for his work on this issue of gun violence, and for his proposals which i'm going to be reviewing
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today, and i will address them in the next few days and i intend to vigorously pursue. so with that, i'm going to take some questions. and i'm going to start with julie pace of ap and i want to congratulate julie for this new, important job. >> i wanted to ask about gun violence. today marks the one-month anniversary of the shooting in newtown which seemed to generate some momentum for reinstating the assault weapons ban. but there's been fresh opposition to that ban from the nra and even harry reid has said that he questions whether it could pass congress. given that, how hard will you push for an assault weapons ban, and if one cannot pass congress, what other measures would need to be included in a broad package in order to curb gun violence successfully? >> all right. well as i said, the vice president and a number of members of my cabinet went through a very thorough process over the last month, meeting with a lot of stake holders in this. including the nra.
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listened to proposals. from all quarters. and they've presented me now with a list of sensible commonsense steps that can be taken to make sure that the kinds of violence we saw in newtown doesn't happen again. i'm going to be meeting with the vice president today. i expect to have a fuller presentation later in the week. to give people some specifics about what i think we need to do. my starting point is not to worry about the politics. my starting point is to focus on what makes sense. what works. what should we be doing to make sure that our children are safe and that we're reducing the incidence of gun violence. and i think we can do that in a sensible way, that comports with the second amendment. and then members of congress, i think, are going to have to have a debate and examine their own
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conscience. because, if, in fact, and i believe this is true, everybody across party lines was as deeply moved and saddened as i was by what happened in newtown, then we're going to have to vote based on what we think is best. we're going to have to come up with answers that set politics aside. and that's what i expect congress to do. but i -- what you can count on is, is that the things that i've said in the past, the belief that we have to have stronger background checks, that we can do a much better job in terms of keeping these magazine clips with high capacity out of the hands of folks who shouldn't have them, an assault weapons ban that is meaningful, that those are things i continue to believe make sense. will all of them get through this congress? i don't know.
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but, what's uppermost in my mind is making sure that i'm honest with the american people, and with members of congress about what i think will work. what i think is something that will make a difference, and to repeat what i said earlier, if there is a step we can take that will save even one child from what happened in newtown, we should take that step. [ inaudible ] i'll present the details later in the week. chuck todd, nbc. >> as you know, senate democrats, harry reid sent you a letter, begging you, essentially, to take, consider some sort of executive action on this debt ceiling issue. i know you've said you're not negotiating on it. your administration has ruled out the various ideas that have been up there, the 14th amendment just this morning one
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of the house democratic leaders jim clyburn asked you to use the 14th amendment and even said sometimes that's what it takes, he brought up the emancipation proclamation, saying it took executive action when congress wouldn't act and he compared the debt ceiling to that. are you considering a plan "b"? and if not, why not? >> well, chuck, the issue here is whether or not america pays its bills. we are not a deadbeat nation. and so there's a very simple solution to this. congress authorizes us to pay our bills. now, if the house and the senate want to give me the authority so that they don't have to take these tough votes, if they want to put the responsibility on me to raise the debt ceiling, i'm
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happy to take it. mitch mcconnell, the republican leader in the senate, had a proposal like that last year. and i'm happy to accept it. but if they want to keep this responsibility then they need to go ahead and get it done. and, you know, there are no magic tricks here. there are no loopholes. there are no, you know, easy outs. this is a matter of congress authorizes spending. they ordered me to spend. they tell me, you need to fund our defense department, at such and such a level. you need to send out social security checks. you need to make sure that you are paying to care for our veterans. they lay this out for me. because they have the spending power. so i am required by law to go
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ahead and pay these ibms. separately they also have to authorize the raising of the debt ceiling in order to make sure that those bills are paid. what congress can't do is tell me to spend "x" and then say but we're not going to give you the authority to go ahead and pay the bills. and i just want to repeat because i think sometimes the american people understandably aren't following all the debates here in washington. raising the debt ceiling does not authorize us to spend more. all it does is say that america will pay its bills. and we are not a deadbeat nation. and the consequences of us not paying our bills as i outlined in my opening statement, would be disastrous. so i understand the impulse to try to get around this in a simple way. but there's one way to get
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around this. there's one way to deal with it and that is for congress to authorize me to pay for that items of spending that they have already authorized. and, you know, the notion that republicans in the house, or maybe some republicans in the senate, would suggest that in order for us to get our way on our spending priorities, that we would risk the full faith and credit of the united states, that, i think, is not what the founders intended. that's not how i think most americans think our democracy should work. you know, they've got a point of view. democrats in congress have a point of view. they need to sit down and work out a compromise. [ inaudible ]
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>> -- and you're not going to negotiate on the debt ceiling. >> yeah. >> so if they say [ inaudible ] >> well, look, chuck, there a are -- there's a pretty straightforward way of doing this and that is to set the debt ceiling aside. we pay our bills. and then we have a vigorous debate about how we're going to do further deficit reduction in a balanced way. keep in mind that, you know, what we've heard from some republicans in both the house and the senate is that they will only increase the debt ceiling by the amount of spending cuts that they're able to push through. and in order to replace the automatic spending cuts, the
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sequester, that's $1.2 trillion. say it takes another trillion or trillion two to get us through one more year, they'd have to idea $2.5 trillion in cuts just to get the debt ceiling extended to next year. $2.5 trillion. congress has not been able to idea $1.2 trillion in cuts that they're happy with. because these same republicans say they don't want to cut defens defense,ing, they climb that they don't want to gut medicare or harm the vulnerable but the truth of the matter is that you can't meet their own criteria without drastically cutting medicare, or having an impact on medicaid or affecting our defense spending. so the math just doesn't add up. now, here's what would work,
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what would work for us to say we've already done scloes to $2 trillion in deficit reduction and if you add the interest that we won't be paying because of less spending, and increased revenue it adds up to about $2.5 trillion. the consensus is we need about $4 trillion to stabilize our debt and deficit. which means we need about $1.5 trillion more. the package that i offered to speaker boehner before we -- before the new year would achieve that. we were actually fairly close in terms of arriving at that number. so, if the goal is to make sure that we are being responsible about our debt and our deficit, if that's the conversation we're having, i'm happy to have that conversation. and by closing some additional loopholes through tax reform which speaker boehner has acknowledged cld